The summer of 2017 is shaping up better for retail sales than previously believed. Here are the five things we learned from U.S. economic data released during the week ending August 18.
Retail sales heated up in July (and the picture in June was better than previously reported). The Census Bureau tells us that retail/food services sales totaled a seasonally adjusted $478.9 billion, up 0.6 percent from May and 4.2 percent from a year earlier. The same report presented a significant upward revision to its estimate for June, raising the previously reported 0.2 percent sales decline to a 0.3 percent rise. After removing the impact of sales at auto dealers/parts stores (+1.2 percent) and gas stations (-0.4 percent), retail sales increased 0.5 percent during July. Most retail segments enjoyed sales gains during the month, led by home materials/garden stores (+1.2 percent), non-luxury department stores (+1.0 percent), furniture retailers (+0.4 percent), bars/restaurants (+0.3 percent), and sporting goods/hobby retailers (+0.3 percent). Sales slumped 0.5 percent at electronics/appliance stores and 0.2 percent at apparel retailers during July. Nonstore retailers (including web retailers) sales continued to blossom, with sales rising 1.3 percent for the month and 11.5 percent from the same month a year earlier.
Factory output slowed in July. The Federal Reserve’s industrial production report finds manufacturing output slipped 0.1 percent during the month, leaving factory output up a modest 1.2 percent from a year earlier. Durable goods production declined 0.5 percent while that of nondurables advanced 0.4 percent. The former was pulled down by a sharp 3.5 percent drop in motor vehicle production, along with decreases in output greater than one percent for both furniture and primary metals. Production increases greater than one percent of both apparel and chemicals led the growth in nondurables output. Overall industrial production grew 0.2 percent, putting it 2.2 percent its July 2016 level. Greater oil and gas extraction led to a 0.5 gain in mining output (+10.2 percent versus July 2016) while higher demand for electricity due to warm summer weather pushed up the production at utilities by 1.6 percent (-0.6 percent versus July 2016). Capacity utilization held steady during the month at 76.7 percent, which remained 3.2 percentage points below the measure’s long-run average.
Forward-looking indicators point towards continued economic growth during the remainder of the year. The Conference Board’s Leading Economic Index (LEI) added 4/10ths of a point during July to a seasonally adjusted 128.3 (2010=100). The measure has grown 3.9 percent over the past year. Eight of ten components of the LEI made positive contributions, led by the interest rate spread, new manufacturing orders, and consumers’ expectations for future business conditions. The coincident index added 3/10ths of a point to 115.7, up 1.9 percent from a year earlier. All four components of the coincident index made positive contributions, including nonfarm payrolls and industrial production. The lagging index eked out a 1/10th of a point gain to 124.8, up 2.5 percent over the past year. Three of the lagging index’s seven components made positive contributions, led by the prime interest rate charged by banks. The press release said the results imply “the U.S. economy may experience further improvements in economic activity in the second half of the year.”
Housing starts slowed during July. Per the Census Bureau, housing starts declined 4.8 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.155 million units. This was off 5.6 percent from a year earlier. Most of the decline during July came from a sharp 17.1 percent in multi-family units (5+ units) in starts (-35.2 percent from the same month a year ago). Single-family home starts slipped 0.5 percent during July but nevertheless remained 10.9 percent above the July 2016 pace. Looking towards the future, there were 1.223 million issued building permits (SAAR), down 4.1 percent from June but up 4.1 percent from the same month a year ago. While the SAAR for single-family home issued permits held firm during July, they declined 12.1 percent for multi-family home permits. Housing completions slowed 6.2 percent during July to a SAAR of 1.175 million units. This was up 8.2 percent from the July 2016 pace.
And yet, homebuilders grew more optimistic during August. The Housing Market Index (HMI) from the National Association of Home Builders (NAHB) added four points during the month to a seasonally adjusted reading of 68. This was up nine points from a year earlier and represented the 38th consecutive month in which the homebuilder sentiment measure was above a reading of 50, meaning more builders saw the housing market as “good” versus being “poor.” The index grew in all four Census regions: South (up seven points to 70), West (up five points to 79), Northeast (up three points to 51), and Midwest (up a point to 65). All growing during the month were indices for sales of single-family homes (up four points to 74), expected sales of single-family homes (up five points to 78), and the traffic of prospective buyers (up a point to 49). The NAHB attributes builders’ more positive outlook to “ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.”
Other U.S. economic data released over the past week:
– Jobless Claims (week ending August 12, 2017, First-Time Claims, seasonally adjusted): 232,000 (-10,000 vs. previous week; -29,000 vs. the same week a year earlier). 4-week moving average: 240,500 (-8.7% vs. the same week a year earlier).
– Business Inventories (June 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.869 trillion (+0.5% vs. May 2017, +2.8% vs. June 2016).
– University of Michigan Consumer Sentiment (August 2017-preliminary, Index of Consumer Sentiment (1966Q1=100, seasonally adjusted): 97.6 (vs. July 2017: 93.4, vs. August 2016: 89.8).
– Treasury International Capital Flows (June 2017, Net Purchases of U.S. Securities by Foreign Investors, not seasonally adjusted: +$35.3 billion (vs. May 2017: +$95.5 billion, vs. June 2016: -$1.6 billion).
– FOMC Minutes
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What We Learned About the U.S. Economy Last Week 